WASHINGTON — With a summer deadline looming for implementation of a 1996 telecommunications-law provision that mandates the inclusion of "V-chip" blocking technology in sets manufactured for U.S. sale, TV manufacturers are raising last-minute objections to the licensing fees being sought by the technology's patent-holders. The manufacturers say they were caught by surprise when several companies recently moved to claim intellectual-property (IP) rights to algorithms enabling V-chip implementations.

The flap could prompt set makers to seek an extension of the July 1 deadline by which half of all 13-inch or larger sets manufactured for U.S. sale must incorporate the V-chip technology. Under the 1996 law, all new sets sold in the United States must contain the technology by July 1, 2000.

The set makers insist the IP claims in question were unknown when the Electronic Industries Associations technical committee developed the V-chip standard. Published in October 1997, EIA-744 established an extended data-packet scheme to transport content-advisory data using a TV's vertical blanking interval.

Alarmed by the looming patent dispute, set makers are now scrambling to identify claimants and to examine what the patents cover and how essential the covered technologies are.

"As we are getting ready for V-chip in our TV product line, we're suddenly faced with a host of IP claimants previously unknown to us," said Tom Patton, vice president of government relations at Philips Electronics. "When EIA set the standard, we were led to believe that it was going to be an open standard, readily available to anyone."

Major TV-set vendors said they have received letters from companies claiming V-chip patent rights and warning of possible patent infringements. Some patent holders are said to be asking for royalties as high as 3.5 percent of the TV set's price — a request that many system vendors called unacceptable.

The licensing dispute underscores the growing friction in the U.S. electronics industry over IP rights as patent holders seek to leverage their technology portfolios. In the case of the blocking technology, set makers insist the V-chip patent holders have, according to one executive, been "coming out of the woodwork."

But the IP claimants say set makers have known for some time they would have to work out licensing issues with V-chip's developers.

"We don't want manufacturers to feel they're being blackmailed because the [V-chip] technology has been mandated," said Tim Collings, developer of the flexible rating system that provides the program data read by the V-chip. "But every manufacturer has been aware of the patents or that it had to work out some [licensing] arrangement" with patent holders.

Nevertheless, set makers who say they believed the technology would be readily available under an open industry standard have responded by taking their complaints about V-chip licensing to the Consumer Electronics Manufacturers Association (CEMA, Arlington, Va.), which sponsored development of the standard through the EIA.

CEMA officials did not return phone calls seeking comment on the dispute, but a CEMA spokesman said the group is "aware of concerns raised by patent holders" and has begun working with set makers to sort out the issues. "We haven't really done anything other than start initial discussions," he said.

Some manufacturers have hinted they may seek a postponement of the July V-chip mandate. "We feel that the FCC and the Congress ought to know about what's going on here," said Philips' Patton. "We feel we should get some kind of protection or relief from the government."

FCC officials who would be called upon to mediate the dispute said they have not been contacted by either side. But an FCC spokesman said an extension of the July deadline "would be something we'd take a look at" if formally asked to do so.

The dispute pits large TV manufacturers against small startups trying to nurture the slowly developing V-chip decoder market. While set makers such Panasonic, Philips and Sony are well known, V-chip decoder box vendors are struggling to attract buyers.

"There are some frustrated little guys out there who are trying to make some money on this," said a House aide involved in the congressional debate on V-chip technology.

All sides say they want blocking technology licensed on a "fair and reasonable" basis. As with most licensing disputes, however, the rub is determining what that phrase means.

One patent holder made an analogy to "market price" on a restaurant menu. "If we have something viable, we will license it on a non-discriminatory basis," said Lee Browne, chief executive of V-chip-decoder patent holder Soundview Technologies Inc. (Greenwich, Ct.). Soundview launched a licensing program for its V-chip technology last summer and is aiming to retrofit existing TVs with its boxes.

Soundview's patent covers a means of transmitting V-chip data via closed-captioning circuitry. Browne said Soundview informed corporate counsel for the major set makers of its patent and that the standard also includes previously disclosed V-chip patents. "The patents in this area have been known for some time," Browne said.

Soundview's technology was developed by an Air Force captain in the early 1980s for another application and was patented in 1985. The rights and intellectual property were eventually assigned to Soundview.

Collings holds a patent on an adjustable rating system for selectively blocking video signals that has been licensed to Tri-Vision International (Toronto). Tri-Vision is said to be in talks with Samsung and Sharp about using the technology, which reads the programming data on the vertical blanking interval just as closed-captioning data is read by TV circuitry.

Canadian V-Chip Design Inc. hold the rights to Collings' technology and would receive royalties, Collings said. Tri-Vision is the only company thus far to have been approached about licensing the technology, he said.

The FCC's approval of a rating system for broadcast TV programming last March cleared the way for adoption of the technical requirements for V-chip blocking technology. Following the FCC approval, Soundview's Browne released this statement, "Despite the claims by others, we are very confident of our patent position with this technology and have concluded that the implementation of the V-chip as it has been approved by the FCC will require a license to Soundview's proprietary technology." He added that the company would "begin to vigorously pursue our licensing program."

IC makers eyeing the V-chip market have so far remained on the sidelines of the patent dispute. Zilog Inc. (Campbell, Calif.), which has developed its own approach to V-chip implementation, said some system and chip vendors think there may be alternative algorithm and methods for handling blocking technology.

"We indemnify our customers if our product infringes patents held by a third party," said Richard Pickard, Zilog's senior vice president and general counsel. "But we also ask in return that our customers indemnify us if their implementation of our chip infringes the third party's patents."